Flowserve Corporation Analyst Day Presentation

88 Pages·2014·6.36 MB·English

by  Askari, Kaivan

FLOWSERVE CORPORATION
ANALYST DAY 2014
March 26, 2014
Agenda
Welcome
Jay Roueche, Vice President -Treasurer and Investor Relations

Company Overview
Mark Blinn, President and Chief Executive Officer

Operational Review
Tom Pajonas, Executive Vice President and Chief Operating Officer

Break

Financial Update
Mike Taff, Senior Vice President and Chief Financial Officer

Executive Introductions
Jeff Drees, President, Flow Control Division
Kim Jackson, President, Engineered Pump Operations

Questions and Answers

Raleigh Operations and Site Visit
Jim McGeehin, General Manager, Raleigh Operations

Lunch

Page 2
Senior Leadership Team
Mark A. Blinn
Mark D. Dailey
President & Chief Executive Officer
SVP & Chief Administrative Officer

• Director, President and CEO since 2009. Previously
served as CFO since 2004 and SVP of Latin America • SVP and Chief Administrative Officer since 2010. Previously
Operations from 2007 served as SVP, HR since 2006 and Chief Compliance Officer
• Previously served as CFO of FedEx Kinko’s from 2003 to since 2005; VP, Supply Chain and Continuous Improvement,
2004, VP and Treasurer from 2002 to 2003 from 1999 to 2005
• Served as VP and Chief Accounting Officer of Centex • Previously, VP, Supply Chain of N.A. Power Tools of The
Corp., from 2000 to 2002 Black and Decker Corp from 1992 to 1999

Thomas L. Pajonas Carey A. O’Connor
EVP & Chief Operating Officer SVP & General Counsel and Corporate
Secretary

• SVP & COO since 2012. Previously served as President
of FCD from 2004 to 2012, SVP since 2006 • SVP, General Counsel and Corporate Secretary since 2012.
• Previously served as MD of Alstom Transport from 2003 Served as VP and Corporate Secretary from 2011 to 2012, VP,
to 2004, SVP of the Power Boiler Business of Alstom Global Group Counsel from 2006 to 2011 and Director, Global
from 1999 to 2003 Human Resources Counsel from 2003 to 2006
• Served as SVP and GM of Asea Brown Boveri from 1996 • Previously an attorney with Haynes and Boone
to 1999

Michael S. Taff David M. Stephens
SVP & Chief Financial Officer SVP & Chief Human Resources Officer

• SVP & CFO since 2012 • SVP & Chief Human Resources Officer since 2014
• Previously served as CFO of Babcock & Wilcox • Previously served VP, Human Resources from 2010 to
Company from 2010 to 2011 2014, VP Global Compensation & Benefits from 2002
• Served as CFO of McDermott Intl. from 2007 to 2010, to 2010 and Director, Global Compensation & Benefits
Chief Accounting Officer from 2005 to 2007 from 1997 to 2002
• Served as CFO of HMT Inc from 2004 to 2005

Page 3
Safe Harbor Statement
Safe Harbor Statement: This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, as amended. Words or phrases such as, "may," "should," "expects," "could," "intends," "plans," "anticipates," "estimates,"
"believes," "forecasts," "predicts" or other similar expressions are intended to identify forward-looking statements, which include, without limitation,
earnings forecasts, statements relating to our business strategy and statements of expectations, beliefs, future plans and strategies and
anticipated developments concerning our industry, business, operations and financial performance and condition.

The forward-looking statements included in this presentation are based on our current expectations, projections, estimates and assumptions.
These statements are only predictions, not guarantees. Such forward-looking statements are subject to numerous risks and uncertainties that are
difficult to predict. These risks and uncertainties may cause actual results to differ materially from what is forecast in such forward-looking
statements, and include, without limitation, the following: a portion of our bookings may not lead to completed sales, and our ability to convert
bookings into revenues at acceptable profit margins; changes in the global financial markets and the availability of capital and the potential for
unexpected cancellations or delays of customer orders in our reported backlog; our dependence on our customers' ability to make required capital
investment and maintenance expenditures; risks associated with cost overruns on fixed-fee projects and in taking customer orders for large
complex custom engineered products; the substantial dependence of our sales on the success of the oil and gas, chemical, power generation and
water management industries; the adverse impact of volatile raw materials prices on our products and operating margins; economic, political and
other risks associated with our international operations, including military actions or trade embargoes that could affect customer markets,
particularly Middle Eastern markets and global oil and gas producers, and non-compliance with U.S. export/re-export control, foreign corrupt
practice laws, economic sanctions and import laws and regulations; our exposure to fluctuations in foreign currency exchange rates, including in
hyperinflationary countries such as Venezuela; our furnishing of products and services to nuclear power plant facilities and other critical
processes; potential adverse consequences resulting from litigation to which we are a party, such as litigation involving asbestos-containing
material claims; a foreign government investigation regarding our participation in the United Nations Oil-for-Food Program; expectations regarding
acquisitions and the integration of acquired businesses; our relative geographical profitability and its impact on our utilization of deferred tax
assets, including foreign tax credits; the potential adverse impact of an impairment in the carrying value of goodwill or other intangible assets; our
dependence upon third-party suppliers whose failure to perform timely could adversely affect our business operations; the highly competitive
nature of the markets in which we operate; environmental compliance costs and liabilities; potential work stoppages and other labor matters; our
inability to protect our intellectual property in the U.S., as well as in foreign countries; obligations under our defined benefit pension plans; and
other factors described from time to time in our filings with the Securities and Exchange Commission.

All forward-looking statements included in this presentation are based on information available to us on the date hereof, and we assume no
obligation to update any forward-looking statement.

Page 4
C O & S
OMPANY VERVIEW TRATEGY
Mark Blinn, President & CEO
Page 5
Flowserve Overview
Leading manufacturer and aftermarket service provider of
comprehensive flow control systems
 History dates back to 1790 with more than 50 well-respected brands such
as Worthington, IDP, Valtek, Limitorque, Durco and Edward
 Our pure-play flow control model focus of industry participants
Design, develop, manufacture and repair precision-engineered
flow control equipment for customers’ critical processes
 Portfolio includes pumps, valves, seals and support systems, automation
and aftermarket services supporting global infrastructure
 Focused on oil & gas, power, chemical, water and general industries
Worldwide presence with approximately 18,000 employees
 69 manufacturing facilities and 179 aftermarket Quick Response Centers
(QRCs) with Flowserve employees in more than 50 countries
Long-term relationships with leading energy customers
 National and international oil & gas, chemical and power companies,
engineering & construction firms, and global distributors
Established commitment to safety, customer service, and quality
with a strong ethical, compliance and performance culture
Page 6
Investment Highlights
• Focused flow control provider engaged primarily in energy infrastructure markets
• Diversified business model provides stability and foundation for earnings growth
– Broad portfolio of distinguished brand names, with over 10,000 customers globally
– Stable business platform due to global geographic exposure and mix of industries served
– Combination of run-rate and large, late-cycle original equipment with recurring aftermarket
– Substantial installed base in existing infrastructure with global aftermarket QRC network
• Emphasis on operational excellence drives margin and cash flow improvement
• Experienced, shareholder focused leadership team - “One Flowserve”
• Growth pursued through customer focus, innovation, expanding capabilities and
strategic investments, primarily in emerging markets
• Disciplined capital allocation with emphasis on growth and shareholder value
• Expected growth will leverage earnings power of improving operating platform

Strong expected cash flow generation focused on
growth initiatives and returns to shareholders
Page 7
Today’s Key Takeaways
•
Consistently delivered on commitments and strategic initiatives
•
Operational excellence and capital structure initiatives produced
significant results, propensity remains
•
Increased emphasis on growth going forward, both organic and
acquisitive – supported by improving large project environment
•
Ongoing strategies will raise the bar further – “One Flowserve”,
customer focus, project management, performance culture and
talent development
•
Strong cash generation supports growth investments and
shareholder return

Solid recent performance – exciting opportunities ahead
Page 8
Earnings Stability Through the Cycle
$4.00
$3.65
$3.41
$2.84
$2.57 $2.53 $2.55 f
$2.29 o EPS
0
e0
15.3% cn.4 Operating Margin
14.4% 14.4% 14.2% a$
$1.49 13.7% d-
13.8% i
u5
g6
S.3
$
P
$0.67 10.9% E
7.8%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Market boom, tight
Industry Market Competitive pricing,
capacity, pricing, Improving growth environment
conditions collapse low project activity
commodity costs
Disciplined execution of strategies and operating excellence drive earnings
and cash generation for growth investments
Page 9
Broad Flow Control Platform
EPD IPD FCD
$2.6 40% $1.2 40% $2.0 40%
$2.5 $1.0
$1.6
30% 30% 30%
)sn $2.4 )sn $0.8 )sn $1.2
oillib$2.3 20% oillib$0.6 20% oillib$0.8 20%
$($2.2 $($0.4 $(
10% 10% 10%
$2.1 $0.2 $0.4
$2.0 0% $0.0 0% $0.0 0%
2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013
• Engineered Custom • Participates in projects • Increasing exposure to oil and
• Late and long cycle-business • Engineered to specifications gas segment
• Growing market share • Focus on improving product gaps • Consistent strong execution
• Solid aftermarket • Improving execution • Focused on growth
• Direct sales to customers • Direct sales and distribution • Direct sales and distribution
Global
Project Sales
Aftermarket
Global
Leverage ONE
Procurement
Customer
Shared
Frame
Services
Agreements
Page 10